A corporate or individual litigant is usually responsible for the payment of its own attorneys’ fees and costs in a lawsuit in the New York state courts. New York follows the so-called “American Rule” that a litigant is “not . . . allow[ed] . . . to recover damages for the amounts expended in the successful prosecution or defense of its rights.” Mighty Midgets, Inc. v. Centennial, 47 N.Y.2d 12, 21-22, 389 N.E.2d 1080, 416 N.Y.S.2d 559 (N.Y. 1979); see also Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 247 (1975) (“In the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys’ fee from the loser.”).
In New York, the right to recover attorneys’ fees “must be statutory or contractual.” Greco v. GSL Enters., Inc., 137 Misc.2d 714, 715, 521 N.Y.S.2d 994 (N.Y. City Civ. Ct. 1987); see also Hooper Assocs., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487, 491 (N.Y. 1989) (“an award of attorneys’ fees to the prevailing party in a litigation must be “authorized by agreement between the parties, statute or court rule”).
An example of a contractual provision affording the right to recover attorneys’ fees is a prevailing party or fee-shifting clause. Such a provision states that if a party to the contract successfully prosecutes, or successfully defends against, a lawsuit arising under the contract, that party is to be reimbursed by the losing party for its (reasonable) counsel fees and costs incurred in the lawsuit.
Various New York statutes and court rules either (1) authorize a prevailing litigant to recover, from its defeated adversary, the attorneys’ fees and costs it incurred in the court proceeding or (2) authorize a litigant to recover, from an adversary which engaged in frivolous conduct, its counsel fees and costs. Some of these fee-shifting statutes in New York are the following:
New York General Business Law § 349: Section 349(a) of the New York General Business Law renders unlawful “[d]eceptive acts and practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” To make out a prima facie case under that statute, a plaintiff must show that the defendant’s acts are directed to consumers, that the defendant is engaging in an act or practice that is deceptive or misleading in a material way, and that the plaintiff has been injured by reason thereof. Under N.Y. Gen. Bus. Law § 349(h), the court may award reasonable attorneys’ fees to a prevailing plaintiff.
New York State False Claims Act, N.Y. State Finance Law §§ 187-194: Section 189 of the State False Claims Act, N.Y. State Fin. Law § 189, prohibits anyone from either knowingly presenting to the state or a local government, for payment or approval, a false or fraudulent claim, or from knowingly making or using a false record or statement to get a false or fraudulent claim paid or approved by the state or a local government. The State False Claims Act authorizes any entity or individual to bring a civil action, on behalf of New York State or a local government, for a violation of section 189 of the State False Claims Act. In such a civil action under the State False Claims Act, a prevailing plaintiff is entitled to recover the attorneys’ fees and costs it incurred in the action. For further discussion of the State False Claims Act, see here.
N.Y. C.P.L.R. 8303-a: Section 8303-a of the New York Civil Practice Law and Rules empowers a court to award costs and reasonable attorneys’ fees not exceeding $10,000 against any litigant found to have interposed a frivolous claim or defense either (1) in a lawsuit to recover damages for personal injury, property damage, or wrongful death or (2) in a lawsuit brought by the individual who committed a crime against the victim of a crime.
22 N.Y.C.R.R. § 130-1.1: Rule 130-1.1 of Title 22 of the New York Codes, Rules and Regulations authorizes, in any civil action or proceeding, monetary punishment for frivolous conduct. Among other categories of pecuniary punishment, Rule 130-1.1 authorizes a court, in its discretion, to award costs and reasonable attorneys’ fees that reimburse actual expenses incurred by a litigant because of an adversary’s frivolous conduct. The court, as appropriate, may make such an assessment against either a party to the lawsuit, the party’s attorney, or both.
If neither an agreement between the litigants nor an applicable statute or court rule creates an exception to the pay-your-own-way “American Rule,” then a corporate or individual litigant must bear its own counsel fees and costs in a lawsuit in the New York state courts.
If your company wants to bring, or needs a lawyer to defend it in, business litigation and you are located in the New York City area, call Attorney David S. Rich at (212) 209-3972.